5 Considerations When Setting Starting Salaries

May 29, 2021

 

Companies with 100 or more US-based employees & at least 1 employee in California should have reported pay data to the California Department of Fair Employment & Housing (DFEH) by March 31. While we have yet to see any reporting from the DFEH, we are expecting to see a gender wage gap in a significant portion of the reporting companies.

The Pay Gap is Closing – Especially in Europe

Globally, the gender pay gap is in the spotlight. Pay Equity legislation has been enacted in Iceland, France, Denmark, Latvia, Luxembourg, Sweden, Iceland, Canada, Portugal, & Ireland. A proposed law would close the gap across the EU.

California is Responding

Meanwhile, California’s pay reporting law referenced above encourages companies to reflect on unfair payment practices. California also prohibits companies from seeking salary history information from candidates, in an effort to reduce past wages from informing future wages.

Specifically, California employers cannot:

  • Seek salary history, including “compensation and benefits,” of an applicant
  • Rely on salary history information in determining whether to offer employment or what salary to offer unless the applicant voluntarily and without prompting discloses their salary history
  • Rely on prior salary, by itself, to justify any disparity in compensation based on sex, race, or ethnicity.

Read the law here.

5 Tips For Setting Starting Salaries

Regardless of whether your company is required to report, you can benefit from setting fair startling salaries. These benefits include better hiring outcomes and increased staff retention. Companies can also use fair compensation practices to drive competitive advantage.

Here are 5 tips for setting starting salaries fairly:

Identify inequities in your pay scales.

Identifying your company’s current inequities is essential if you want to build a fairer pay scale in the future. It can help you determine what is driving your pay gap. Then, it can help inform next steps to remediate and prevent inequities in compensation.

The DFEH reporting requires companies to compile information about your employees’ race, ethnicity, gender identity, position, and annual earnings. Companies who aren’t required to report to DFEH will need to compile the information internally. Once you have the information at hand, you may need to hire an outside expert to assess your data and draw conclusions about any inequities.

Document which factors matter in your workers.

For each position within your organization, you should have a good grasp on the requisite experience, education, training, skills and knowledge the workers need. It can be helpful to list compulsory requirements alongside the ‘nice to haves’. You should also determine current market and industry rates for similar workers.

This information should be documented and available to your hiring team for any position being advertised. It should be routinely updated.

Develop fair processes for determining starting salaries.

Once you’ve identified the factors you want in your workers, you can develop a scale centered around how many of those criteria a worker meets. For example, workers who only demonstrate the minimum mandatory requirements might be offered compensation towards the lower end of the scale while workers with some of the ‘nice to haves’ might be offered more.

Here’s a helpful job evaluation template created by the California Commission on the Status of Women & Girls.

Be ready to be transparent with your pay scales.

By making your processes for determining starting salaries visible to candidates, you are more likely to attract the right candidates with the right expectations about payment and responsibilities.

Develop a policy that addresses candidate salary negotiations.

Reddit made headlines in 2015 when it announced that the company would no longer engage in salary negotiations. The company instead adopted a policy of offering fair compensation, which candidates could either take or leave.

While your company’s policy doesn’t need to be as black and white as Reddit’s, you should develop a framework for salary negotiations. This framework should outline your company’s position on when it is and when it’s not appropriate to deviate from its pay scale, as well as when additional perks (like increased leave, benefits, or equity) can be considered.

If you need assistance developing compliant hiring processes, reach out. We’re here to help!

You can also see our 5 tips for Minimum Wage Compliance here for more information.

Disclaimer

The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this website or any of the e-mail links contained within the site do not create an attorney-client relationship between CGL and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

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